The Ethical Investment Advisory Group (EIAG), which advises the Church of England on ethical investment, has tightened its recommended investment restrictions.

From July, the revenue threshold on investment exclusions – i.e. the maximum percentage of revenue a company can earn from a certain activity before it is removed from the stock lists of the Church’s investment funds – is to be no more than 10%, a reduction on the previous 25% threshold.

Activities covered by the restriction include tobacco, gambling, high-interest-rate lending and human embryonic cloning.

While this limit represents a default across all investments, some activities have lower thresholds.

There is a 3% threshold for pornography, while there is zero tolerance for indiscriminate weapons, such as nuclear arms and land mines.

Edward Mason, secretary at the EIAG, said: “The 25% threshold is historic and has been used for many years. But screening has become much more sophisticated, [allowing] us to do this.”

The Church invests through three bodies: the Church Commissioners, whose endowment fund is worth £6.1bn (€10.2bn); the Church of England Pensions Board (CEPB); and the CBF Church of England Funds, investing on behalf of churches and dioceses.

Most of the Church’s investments are directly held, with MSCI ESG Research providing screening.

The threshold reduction follows a review requested by the Archbishop of Canterbury, the Church’s spiritual leader, after the Church Commissioners were found last year to have invested indirectly in payday loan company Wonga.

Mason said the new restrictions would not have prevented the exposure to Wonga, which was in a pooled fund and thus could not have been screened in the same way as direct holdings.

He said: “Exposure to restricted investments, like Wonga, can occur in pooled funds, and the EIAG accepts this.”

However, the EIAG will publish a policy on pooled funds this autumn.

It will not bar their use but give recommendations on how to manage the risk of exposure to restricted investments.

In its annual review, the EIAG also announced that during 2013 it instructed votes for the Church Commissioners and CEPB on more than 30,000 resolutions at around 3,000 company meetings.

In relation to resolutions on executive remuneration packages, the EIAG withheld support – i.e. voted against or abstained – in more than 70% of cases, including WPP and Barclays.

In terms of corporate engagement, the EIAG’s successes during 2013 included all three major UK-listed supermarkets – Tesco, Sainsbury’s and Morrisons – for the first time publishing alcohol policies acknowledging the potential for alcohol to cause harm.

And a major telecommunications company, following engagement with EIAG, stopped promoting pornography on its mobile handsets in the UK.

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